James Eric Bjornholt - Chief Financial Officer, Principal Accounting Officer and Vice President of Finance Ganesh Moorthy - Chief Operating Officer Steve Sanghi - Chairman, Chief Executive Officer and President Gordon W. Parnell - Vice President of Business Development and Investor Relations

Christopher Caso - Susquehanna Financial Group, LLLP, Research Division James Schneider - Goldman Sachs Group Inc., Research Division Kevin E. Cassidy - Stifel, Nicolaus & Co., Inc., Research Division Sumit Dhanda - ISI Group Inc., Research Division Ruben Roy - Mizuho Securities USA Inc., Research Division Andrew Paik Steven Eliscu - UBS Investment Bank, Research Division JoAnne Feeney - Longbow Research LLC Brendan Oliver Furlong - Miller Tabak + Co., LLC, Research Division Cody G. Acree - Williams Financial Group, Inc., Research Division Rajvindra S. Gill - Needham & Company, LLC, Research Division

Good day, everyone, and welcome to this Microchip Technology Third Quarter and Fiscal Year 2013 Earnings Results Conference Call. As a reminder, today's call is being recorded. At this time, I would like to turn the call over to Microchip's Chief Financial Officer, Mr. Eric Bjornholt. Please go ahead, sir.

Good afternoon, everyone. During the course of this conference call, we will be making projections and other forward-looking statements regarding future events or the future financial performance of the company. We wish to caution you that such statements are predictions, and that actual events or results may differ materially. We refer you to our press release of today, as well as our recent filings with the SEC that identify important risk factors that may impact Microchip's business and results of operations. In attendance with me today are Steve Sanghi, Microchip's President and CEO; Ganesh Moorthy, Microchip's COO; and Gordon Parnell, Vice President Business Development and Investor Relations. I will comment on our third quarter of fiscal year 2013 financial performance; and Steve and Ganesh will then give their comments on the results, discuss the current business environment and discuss our guidance. We will then be available to respond to specific investor and analyst questions. I want to remind you that we are including information in our press release and in this conference call on various GAAP and non-GAAP measures. We have posted a full GAAP to non-GAAP reconciliation on the Investor Relations page of our website at www.microchip.com, which we believe you will find useful when comparing GAAP and non-GAAP results. I will now go through some of the operating results, including net sales, gross margin and operating expenses. I will be referring to these results on a non-GAAP basis prior to the effects of our acquisition activities and share-based compensation. Net sales into the December quarter were a record $416 million and were up 2% sequentially from non-GAAP net sales of $407.8 million in the immediately preceding quarter. Revenue by product line was $266 million for microcontrollers, $93.3 million for analog, $32.5 million for memory, $21.3 million for licensing and $2.9 million of other. Revenue by geography was $77.3 million in the Americas, $84 million in Europe and $254.7 million in Asia. On a non-GAAP basis, gross margins were 56% in the December quarter and at the high end of our guidance provided on November 8. Non-GAAP operating expenses were 30.6% of sales and near the low end of our guidance. Non-GAAP operating income was 25.4% of sales and net income was $84.5 million. This resulted in earnings of $0.41 per diluted share, which is at the high end of our guidance. On a full GAAP basis, gross margins, including share-based compensation and acquisition-related expenses, were 48.2% in the December quarter. GAAP gross margins were negatively impacted by the sell-through of $30.8 million of written up inventory costs associated with our acquisitions. Total operating expenses were $183 million or 44% of sales, and include intangible amortization and special charges of $42.3 million and also includes share-based compensation of $12.3 million. The GAAP net income was $10.2 million. In the December quarter, the non-GAAP tax rate was 15.5%, and the GAAP tax expense was impacted by the acquisition-related items and several nonrecurring events. Our tax rate is impacted by the mix of geographical profits, withholding taxes associated with our licensing business and the tax effect of various nonrecurring items. Our tax rate in the March quarter will be impacted by the retroactive reinstatement of the R&D tax credit that we expect will provide a benefit of about $5.6 million related to calendar 2012 and results in a non-GAAP tax rate of between 8.5% and 9%. Excluding any one-time events, we expect our longer-term forward-looking non-GAAP effective tax rate to be about 13% to 15%. To summarize the after-tax impact that the non-GAAP adjustments had on Microchip's earnings per share in the December quarter, acquisition-related items were about $0.32, share-based compensation was about $0.056, nonrecurring favorable tax events were about $0.018 and noncash interest expense was about $0.006. The dividend declared today of $0.353 per share will be paid on March 7, 2013, to shareholders of record on February 21, 2013. The cash payment associated with this dividend will be approximately $69 million. This quarter's dividend will be our 42nd consecutive quarter of making a dividend payment. We have never made reductions in our dividend. In fact, this quarter's increase marks the 36th occasion we have increased the dividend payment. And this program continues to be an important component of how we'll return value to our shareholders. Moving onto the balance sheet. Consolidated inventory at December 31, 2013, was $261.6 million or 111 days. I want to walk you through how the inventory days calculation is impacted by the purchase accounting associated with the SMSC acquisition as it can be confusing. The accounting rules require us to first write up on acquired company's inventory to its fair value as of the acquisition date, causing a huge increase in the inventory balance. This effectively values inventory at selling price, less cost to sell. Secondly, when the inventory is sold, the inventory balance is significantly reduced with the written up inventory costs flowing through cost of goods sold. The written up inventory coming off the balance sheet and pulling through cost of goods sold in the December quarter reduced the days of inventory calculations significantly. Lastly, in the March quarter, the cost of goods sold will not reflect any significant amount of sell-through of written up inventory and the inventory balances will be clean. So the days of inventory calculation will return to a more normalized level. We expect days of inventory at the end of March to be in the 123 to 129 day range. So we are making progress in reducing the inventory balances with the action we implemented in our factories in the December quarter. Inventory at our distributors are at their all-time lowest levels of 27 days. We believe the distribution inventory will increase in the March quarter. I want to remind you that our distribution revenue recognition throughout the world is recognized on a sell-through basis. At December 31, the consolidated accounts receivable balance was $177.5 million. Receivable balances are in great condition, with excellent payment performance continuing from our customers. We had strong free cash flow generation in the December quarter of $123.2 million, prior to our dividend payment. As of December 31, the consolidated cash and total investment position was approximately $1.77 billion, and we had $610 million in borrowings under our revolving line of credit. Excluding dividend payments, we expect our total cash and investment position to grow by approximately $110 million to $130 million in the March quarter. Capital spending was approximately $9.9 million for the December quarter. We expect about $24 million in capital spending in the March quarter, as we prepare for the upturn. We expect overall capital expenditures for fiscal 2013 to be about $60 million. Depreciation expense in the December quarter was $23 million. I will now ask Ganesh to give us comments on the performance of the business in the December quarter. Ganesh?

Thank you, Eric, and good afternoon, everyone. Let's now take a closer look at the performance of our product lines. Our microcontroller revenue grew 1.8% sequentially in the December quarter to achieve an all-time record of $266 million in revenue. Microcontroller revenue was also up 22.6% versus the year ago quarter. And as you will hear in Steve's remarks later, we gained market share in all microcontroller segments during 2012. Microcontrollers represented 63.9% of Microchip's overall revenue in the December quarter. Our 16-bit microcontroller business was up 12.6% sequentially in the December quarter, achieving a new record for revenue. We continue to expand the breadth of 16-bit solutions that we're offering and customers that we are serving, as we continue to gain market share in this segment. Our 32-bit microcontroller business was up 17.4% sequentially in the December quarter. We are continuing to win new designs and expanding into new applications to enable further growth in revenue and market share. Now moving to our analog products. Our analog business grew 7.7% sequentially in the December quarter to achieve a new record and continues to perform exceptionally well. Analog revenue represented 22.4% of Microchip's overall revenue in the December quarter, the highest proportion of our revenue ever. During the quarter, we launched 2 new families of analog products. The first is a portfolio of high-efficiency discrete power MOSFETs, specifically tuned for power applications. The second is a family of analog power controllers that offer higher voltages and enable significant energy efficiency improvement in power conversion applications. Both product families expand our served available market for existing customers and applications, as well as enable us to penetrate new customers and applications, and nicely complement our dsPIC digital signal controllers, which already have a leadership position in the power conversion market segment. Now onto our memory business. This business is comprised of Serial EE memory products, as well as our SuperFlash Memory products, and was down 11.2% on a sequential basis. While this business has had some drive on our growth, our memory business is becoming a smaller percentage of our overall business and was down to 7.8% of Microchip's overall revenue in the December quarter. We continue to run our memory business in a disciplined fashion that maintains consistently high profitability, enables our licensing business and serves our microcontroller customers to complete their solutions. Before I wrap up, a quick update on a couple of elements of the SMSC integration. All SMSC products started shipping from Microchip's operational systems on December 1, 2012, a month ahead of the plan we had last communicated to you. We have begun implementing actions to exploit our packaging and testing infrastructure in Thailand to extract operational synergies. This will, however, be a multi-quarter effort, as we systematically prioritize and execute the plans we have developed. We expect this will result in incremental EPS accretion and will be a component that drives us to our long-term business model. So to summarize, the SMSC integration is going well and we're on or ahead of our integration plans. Let me now pass it to Steve for some general comments, as well as our guidance going forward. Steve?

Thank you, Ganesh, and good afternoon, everyone. Today, I would like to first comment on the results of the fiscal third quarter of 2013, then I will provide guidance for the fiscal fourth quarter of 2013. We are pleased with our execution in the December quarter, despite a very challenging macroeconomic environment. Our net sales, gross margin, operating expenses and earnings per share were all better than the mid-point of our guidance. We made new all-time record in net sales for several of our product lines. Microcontrollers, with $266 million of net sales, posted a new record. Our 16-bit and 32-bit microcontrollers each posted a new record in revenue. Analog products also posted a new record. Our licensing businesses also performed very well in the quarter and achieved this 6% sequential growth. Last, but not the least, the December quarter was our 89th consecutive quarter of profitability. December quarter also had several other highlights. First, our non-GAAP earnings per share at $0.41 were at the high end of our guidance. Number two, we achieved $0.065 accretion from SMSC, which was well above our guidance of $0.04 to $0.05 for December quarter. Number 3, during the quarter, we instituted a rotating time-off program for our fab employees and substantially reduced the wafer starts in our factories with reduced inventory. Because of SMSC acquisition and the write-up of SMSC inventory to market value, the inventory calculations are very complex and can be confusing. In our T.J. Rodgers [ph] of Cypress Semiconductors calls it wacky purchase accounting. I happen to agree. Eric Bjornholt went through a 3-step process on inventory after an acquisition. In step 1, the inventory is written up to the fair market value, so the inventory balloons and the inventory days go up. In the second step, the written up inventory's sold, so the inventory drops and the cost of goods sold balloon up. So the inventory days drop significantly. In December quarter, you saw this impact of step 2. In step 3, the inventory returns to normal, as the written up inventory and the higher cost of goods sold are purged from the system. The inventory days go up again because of lower cost of goods sold. So you will see that in the March quarter, when we expect the inventory days to be about 123 to 129 days. As I have said before, inventory calculations are complex after immediate acquisition. Please let me worry about the inventory. We're making significant progress in reducing Microchip inventory. Our longer-term goal for inventory continues to be 115 to 120 days. We also instituted a 5% pay cut for all executives, and then requested other employees of the company to join the executives in a voluntary 5% pay reduction through June 30, 2013. I'm happy to report that approximately 2,400 employees voluntarily stepped up to take a 5% pay cut. We call it shared sacrifice. This helped in reducing the operating expenses and avoided a broad-based layoff to cut operating expenses. This also allowed us to remain committed to our investments and will help lead to a stronger recovery for Microchip. I want to thank all the dedicated Microchip employees who volunteered for this pay cut. The participation level exemplifies the strength and uniqueness of Microchip culture. I would also like to comment on the calendar year 2012 results. I had a chance to compare Microchip's microcontroller results with the Semiconductor Industry Association data for 2012 that was just released last week. We are pleased that Microchip gained a market share in each of 8-bit, 16-bit, 32-bit and overall microcontrollers. For calendar year 2012, our total microcontroller revenue was $997 million, which was up 3.8% from calendar year '11 revenue of $961 million. We don't break out the individual revenues by bit worth. But overall, microcontroller market share increased from 7.37% in 2011 to 8.25% in 2012. This market share in December quarter was even higher and ended up at 9.34%. There's no secret about these numbers. Our microcontroller revenue in December quarter was $266 million. And the industry microcontroller revenue, as reported by SIA, was $2.849 billion. So $266 million divided by $2.849 billion is 9.34%, which was our market share in December quarter. We expect the market share to increase further as we are guiding better than the average of the industry. Now, I will provide guidance for the fiscal fourth quarter of 2013. We're starting to see exceptionally strong bookings and expedite requests in our business, driven by strong demand in our design win pipeline. The backlog is starting to strengthen for this quarter and the bookings activity into the June quarter is exceptionally high. We believe that December quarter marked the bottom for this cycle for Microchip. A number of our product lines are showing significant momentum and will grow in the March quarter. We have also accounted for the effective Lunar New Year in Asia this quarter, as you have seen in numerous times before, when we are likely to see the effect of an industry recovery a quarter ahead the rest of the industry. Taking all these factors into account, we expect Microchip's total net sales in the March quarter to be up between 1% to 4% sequentially. We will maintain the rotating time off in our fabrication facilities to continue to reduce inventory. This strategy of rotating time-off worked very well in -- during 2009. It reduces factory output. But at the same time, keeps our staff employed for reduced work hours and give us the flexibility to ramp rapidly when the need arises. For the time being, we have sufficient inventory at the die inventory level that can provide surge capacity, but we will continue to evaluate the timing of any actions related to our wafer fabs. We're ramping our back-end facilities in assembly and test to meet the increased demand of our customers. Our back-end facilities have switched from lowering finished goods inventory to now rebuilding finished goods stock to maintain short lead times and meet the increased demand of our customers. On a non-GAAP basis, we expect our gross margin to be between 55.75% to 56.25% of sales. We expect operating expenses to be between 29.25% to 30.25% of sales. And we expect the operating profit percentage to be between 25.5% to 27% of sales. And we expect non-GAAP earnings per share to be between $0.45 and $0.49 per share, which includes about a 2.7 cents favorable impact from the reinstatement of the R&D tax credit. This EPS includes about $0.07 to $0.08 accretion from the acquisition of SMSC, which is up from $0.065 cents in December quarter. For the June 2013 quarter, we expect the accretion from SMSC to increase to about $0.09 to $0.10 per share, which is above the full range of accretion that we had guided on August 2, 2012, at the close of the transaction. During fiscal '14, we expect the attrition from SMSC to be between $0.38 to $0.42 per share. These numbers remain subject to the health of the underlying economy in general. So as you can see, we are progressing very well in the integration of SMSC. We are now guiding accretion to be higher than what we had originally guided for fiscal 2014. We have already made significant progress in transforming SMSC's business model, SMSC's gross margin, operating expenses and operating profits are already significantly better than what SMSC achieved during its full fiscal year prior to the acquisition. SMSC's operating profit in the December quarter was 21%, well above the 12% operating profit that SMSC reported in fiscal year '12. We expect that significant improvements in SMSC financial metrics will continue. Our long-term model for the combined company remains a gross margin of about 60%, plus/minus 0.5%; operating expenses of about 27.5%, plus or minus 0.5%; and operating profit of about 32.5%, plus or minus 0.5%. All of these numbers are non-GAAP. This long-term model will continue to be a premium model in the semiconductor industry and will drive substantial shareholder value. This, together with one of the highest dividends in the semiconductor industry, will continue to generate excellent shareholder value. Given all the complications of accounting for the acquisitions, including amortization of intangibles, restructuring charges and wacky inventory write-up on acquisition, Microchip will continue to provide guidance and track its results on a non-GAAP basis. We believe that non-GAAP results provide more meaningful comparisons to prior quarters, and we request that the analysts continue to report their non-GAAP estimates to first call. With this, operator, will you please poll for questions.

[Operator Instructions] And we'll take our first question from Chris Caso with Susquehanna Financial Group. Christopher Caso - Susquehanna Financial Group, LLLP, Research Division: I'm wondering if you could give a little more color on some of the business improvement that you've seen. Where are you seeing that as a broad-based? Is it at any particular customers? And then, in particular, I was interested in the comment about the expedites that you were seeing. I don't think that's something we've seen, we've heard from your competitors. Why do you think your customers' expediting? I would assume, given the inventory levels, that the lead times are pretty low right now.

So, Chris, thanks for the question. Basically, the inventories have run down very low at the customers, as well as at the distributors. And the customers were probably accounting for either much deeper cycle in the December or not as much recovery in this current quarter. So we are seeing a fairly strong expedite activity, which is driven by customers not having inventory and them not being able to find that inventory distribution either. The strength is pretty broad-based. We are pretty much seeing it from all geographies, including Europe. And we're seeing it in direct as well as distribution. And it doesn't seem to be any specific market segment, vertical market or anything where it's happening. We have pretty strong bookings across the board. Christopher Caso - Susquehanna Financial Group, LLLP, Research Division: Okay, that's great. And I guess, with respect to the fab loading. You had earlier talked about running that at lower levels through the June quarter. Is that still the -- is that still the plan? Have some of the improvements you've seen caused you to change that? And perhaps you can just remind us how we should expect as that fab loading increases, we should start to see benefits on the gross margin line.

So that's a very good question, Chris. We're asking the same question to ourselves. At this point in time, we still have inventories higher than what we would like. Total inventories and the majority of the excess inventory is sitting in the die banks. So at this current time, we are ramping our back-ending facilities to move that inventory from die bank to assembly and test into finished goods, to keep the lead time short, meet the expedite request and meet the increasing needs of the customers. We do not feel yet that we need to take any action in the fab because the die banks are quite healthy. Now as those die banks start to correct and overall inventory starts to adjust, we will be watching it on, really, a monthly basis, even more often. And the rotating time-off is very flexible. I mean, it allows us on a moment's notice to be able to increase the wafer starts by simply asking the production staff to work more hours than what they're working today. And that's the beauty of it. We don't have to hire people. We haven't laid off the people. They're all working. They simply are taking some furlough days off and they simply come to work more hours, which they would love it anyway. So as we start to make those changes, we'll communicate to the investors and analysts. Today, we're not prepared to really make any decision on it.

And we will take our next question from Jim Schneider with Goldman Sachs. James Schneider - Goldman Sachs Group Inc., Research Division: I was wondering if we can maybe talk about the expedited orders or the increased backlog in maybe a different way. I think you talked about bookings into the June quarter as well. Can you maybe give us some kind of metrics about the longer dated order backlog into the June quarter, either in terms of how many more weeks further extended backlog that you're seeing now that compared to normal or some other kind of metrics indicating coverage?

It's a more qualitative assessment we're giving you at this point in time. Clearly, as we look at how far into the quarter are we booked, at this time of the quarter, we can see we are significantly higher booked into this quarter, and we can see backlog starting to fill into the next quarter as well. I don't have a precise number to give you to say how far in that we are for next quarter. James Schneider - Goldman Sachs Group Inc., Research Division: Okay. And then maybe if you could give us any kind of color on the end markets and which ones you expect to be up stronger or maybe less strongly into the March quarter, that will be helpful.

As I earlier mentioned when Chris asked the question, I don't think we are seeing any difference by end markets nor we track them, really, as well as we would like to. Our business is largely horizontal. We serve into a lot of customers and lots of customers through distribution. So we're seeing pretty broad base strength. But some large customers where we do business directly, whether they're in the Consumer segment or Industrial segment or Automotive segment or Computing segment, we're seeing really pretty strong business bookings across the board.

And we will take our next question from Kevin Cassidy with Stifel, Nicolaus. Kevin E. Cassidy - Stifel, Nicolaus & Co., Inc., Research Division: Just along the same lines, gross margin, you guided for flat quarter-over-quarter. Can you tell what the dynamics are there? If you said that inventory write-down was a drag on gross margins in the third quarter. Just wondering why it's not going up a little more in the fourth quarter?

So, Kevin, I think maybe it's being confused. We didn't talk about an inventory write down. We talked about an inventory write-up associated with purchase accounting. And that only impacts our GAAP gross margins, which you saw were down pretty significantly at about 48%. But that does not impact the non-GAAP results. So that is not something that's impacting the quarter-over-quarter activity. Steve talked about the activities in the wafer fabs. We're remaining with these rotating time-offs schedules at this point in time and really just ramping on the back end. So that's really what's happening on the gross margin line. There isn't anything that is going to improve the gross margins in the March quarter significantly. Kevin E. Cassidy - Stifel, Nicolaus & Co., Inc., Research Division: And also, how long did the employees agreed to take the 5% cut?

It's through end of June. Sumit Dhanda - ISI Group Inc., Research Division: Okay. Is there no other metrics along with that, just through June?

Well, so it's basically voluntary in nature. So 2,400 employees voluntarily stepped up and say, we'll help the company when the operating expenses need to be brought down rather than doing a layoff. We're saving money that way. Therefore, committed to the programs, which will otherwise have to readjust or slip out. Now, if the business environment continues to strengthen, as it is looking, we'll certainly look at it again as we talk to the employees. We could reduce the 5%. We could terminate it early. All those options are there, but the number just became public today. So that conversation hasn't happened with the employees.

And we will go next to Sumit Dhanda with ISI Group. Sumit Dhanda - ISI Group Inc., Research Division: A couple of questions. The analog business did exceptionally well in the quarter. So just curious, I know you've been doing well in analog for some time, but was there any specific factor that really helped drive that 8% growth, which was so much better than the rest of the industry?

Gordon, do you want to take that one? Gordon W. Parnell: Well, analog has been doing very well so much for many quarters, as you say. We have been able to take advantage of our analog business, not only being attached to microcontrollers, but also extending its reach into other areas of analog capability. Certainly, as we've extended into 16 and 32-bit microcontrollers, the opportunity has improved, and we've been able to take advantage of that. Our design win funnel is performing very, very well. And we're very bullish on the capabilities that we have in analog and how we've been able to grow that business. Ruben Roy - Mizuho Securities USA Inc., Research Division: Steve, maybe just as follow-up on that. If you had to take a stab at, not that we're going to hold you to this, but by how many points do you think analog business can outperform the broader analog business this year? Do you think it's 5 points more or less? Just your thought process given the design win funnel.

Sure. You will hold me to it so I'm not going to answer it. Sumit Dhanda - ISI Group Inc., Research Division: Well then maybe can I ask you a different question?

Pull me to it, you will be the one. Sumit Dhanda - ISI Group Inc., Research Division: On the bookings, any color you can provide, Steve, on when you started to see the pickup. Was it just in January? Was it November, December? Has the bookings trajectory strengthened only lately? Or was it strengthening through the course of the fourth quarter, because the data is all over the map, depending on which company you talk to this earnings season?

So I think it's been strengthening along. The late part of last quarter was pretty good. But around the Christmas timeframe, lots of people are off and all that. So the data gets very muddy whether you're getting higher amount of bookings in shorter number of days, because purchasing managers wouldn't be working certain days. So we cannot decide for the data as well in that timeframe. But then as we came into January, post the New Year, bookings continue to strengthen and the last several weeks have been just very, very strong.

[Operator Instructions] And we will take our next question from John Pitzer with Crédit Suisse.

This is Andrew Paik calling in for John. I was just curious if you now have a better sense of normal seasonality, including SMSC. And historically, you have been a good indicator of the cycle. So I was curious what your current view is respect to the channel inventory then lead times. It seems like lead times are low, would this lead to a rather muted recovery, in your opinion?

Well, so 2, 3 questions in there. First one was regarding the cyclicality. I don't think we have any better handle on cyclicality, in general. I think if you look at the last several years in semiconductor industry, there's just no cyclicality. I mean it's just like, things are all over the place. And if you take the average of a given quarter for 5 or 6 years, it doesn't really tell you much about where the current quarter could perform. So we could go back to a historic seasonality, where June and September are good, strong quarters. And the March is the reasonable quarter. December is usually very weak. But I'm not sure if that's good right now. March quarter is looking pretty good and December quarter, and -- I'm sorry, June quarter should strengthen further. The second part of your question was what?

Just I was curious your current view of the cycle, given that you have been a good indicator in the past. It looks like lead times are pretty low these days. And I was curious if that could possibly lead to a rather muted recovery in the near term?

Well, when the lead times are low, it doesn't lead to a muted recovery, it leads to a strong recovery. Because when the lead times are low, the customers usually have no inventory and slight disturbance or uptick or demand drives what it is driving right now, huge expedite requests, strong bookings. Because when people can find certain parts, lead time shorts doesn't always mean 100% of the products just available today. It's usually on the majority of the products and whenever a customer needs some parts and if they don't find it for a week, the factory's down for the week, and that's very, very expensive. So usually, when the lead times are short, people don't hold any inventory and as soon as there's any sign of recovery, huge kind of orders come in, like we are seeing today. And then the recovery's actually fairly strong, I would say.

Okay. And as a quick follow-up. Just given the pay cuts through the June quarter, how should we think about the OpEx trajectory for the, I guess, post -- I guess, through June and then after the June quarter?

So we haven't dollarized for you. I don't know if you have the number. But the March quarter is in our guidance that we're giving you. And then we can further give you guidance for past the June quarter as those pay cuts are reversed. There's also a chance that they reverse early or the pay cut is lessened from 5% or a smaller number, as I mentioned earlier, based on if we see that recovery strengthening in the June quarter, June quarter will be very strong, then we're unlikely to stay through the pay cut to the end of the June. That just wouldn't be fair to the employees at that point in time. So that's something we have to give you guidance as we go along.

And we will take our next question from Steven Eliscu from UBS. Steven Eliscu - UBS Investment Bank, Research Division: Similar question on the cycle, but I want to ask it somewhat different way. Just based on your experience, strengths you're seeing this quarter. And you're already indicating further strength in the June quarter. Is there any chance that we're getting a restocking cycle that potentially holds from the June quarter, which has historically been seasonally strong? Or do you believe that we're perhaps at the front end of a multi-quarter restocking cycle? What would history tell you?

The history tells me that not all customers, not all purchasing managers telephone each other and line up together to really go do something. And there's always a multicycle. We always see too many moving parts across a large customer base. There are customers pushing out orders, and there are many customers pulling in orders and expediting. So this usually always happens in a multicycle way -- no, multiquarter way, not in one quarter. Steven Eliscu - UBS Investment Bank, Research Division: Okay, that's helpful. And then more strategic question. Just we've seen a number of recent announcements from your competitors on low- to mid- range 32-bit controllers that are using 90-nanometer or 65-nanometer technology. And even this one competitor talked, this past week, about 300-millimeter wafer manufacturing. Is there something that -- do you believe there's something that's changed where, now, advanced process technology for low-end 32-bit is now being brought to bear? And potentially with the risk to you that some of that may squeeze your 16-bit price stack? What is your view on how to address that threat?

Well, it's nothing new. There have been 32-bits at specific price points that you've been on calls where that had been brought up 4, 5 years ago. This market has many different factors upon which decisions are made. They have platform decisions, there are many competitive expectations beyond price that customers work with. And we can -- as you can see in our results, we have continued to outperform the market on our microcontrollers, on our 16-bit microcontrollers, on our 32-bit microcontrollers. As time goes on, were not standing still. We continue to evolve our product lines. We know what the competitive issues are and where they're coming from. And you will continue to see responses from us to address any competitive threats we see.

But, Steve, how is this question different than the one for the last 15 years where Freescale will do X, Y, Z. and TI has a 300-millimeter fab and Samsung has excess capacity and they will lower the price, and blah, blah, blah, and I just rattled up some names. It's the same thing over and over. Microcontroller market is very complex. It takes thousand-plus MOSFETs from Microchip to really completely serve their market. Somebody wants low-power. Somebody high power. Somebody wants low current. Somebody wants high current. Somebody wants high-performance. Somebody wants low price. It's a very complex market and we know how to serve it very well. I mean, our 8 and 16-bit businesses did very, very well last year. Our 16-bit business was up very substantially year-over-year, and our 8-bit business gained significant share from the market as we compared to the SIA data. So everybody has their strategies. But our strategies are working very well. We gain share by bit worth and overall substantially. And as we go to the conferences, we'll show you some graphs on it. The overall market share growth went from about 7% to a little over 9% going out of the year. Steven Eliscu - UBS Investment Bank, Research Division: And if I could just ask one last quick question. Last quarter, you guided for SMSC sales of $87 million to $94 million. I realized you're not reporting that going forward. But can you at least tell us what you did relative to that guidance?

We did near the high end of that.

And we will go next to JoAnne Feeney with Longbow Research. JoAnne Feeney - Longbow Research LLC: I'd like to go back to the OpEx questions earlier. Hopefully, you can give us a little bit more detail on the breakdown on the savings that you saw last quarter, probably some of those salary cuts. But I'm wondering what kind of progress you're making in pulling efficiencies through from the SMSC acquisition. And what we might expect going forward. Is this sort of going to be linear improvement? And perhaps in so explaining, you might shed light on why the accretion levels have come up for you guys?

So I think, if you've seen my commentary, we had $0.038 accretion in September quarter. We did $0.065 cents per share in December quarter. We're guiding to $0.07 to $0.08 for March. And what was it? $0.09 to $0.10 for June. So that increasing line of accretion is really a result of systems getting combined and then people becoming redundant, reducing costs, renegotiating stuff based on combined Microchip and SMSC activity, combining offices, closing down leases, those tend to be smaller items. But there is -- across the board, I mean, this is what we did with SST. We're very good at these consolidations. And it's really coming as a result of that. So SST is up -- I'm sorry, SMSC's operating expenses were well in excess of 40% when we started, and it just made 21% operating profit. And we're not breaking out the gross margin. But you can get a feel for. I told you that operating profit number, you can get a feel for how much improvement has been made. The prior year when there were standalone, the operating profits were 12% and on higher revenue. Because it was close to the downturn. JoAnne Feeney - Longbow Research LLC: And how much more can you pull out in terms of efficiencies? Are we near the end of that or in the middle? I guess I'm just trying to think about when those salary increases come back into play, whether it's in the September quarter or earlier?

The salary increases are minute. They don't even make an impact of a penny. JoAnne Feeney - Longbow Research LLC: Okay. And then do we still expect to see more savings from SMSC?

Yes. JoAnne Feeney - Longbow Research LLC: For the OpEx line?

Yes, we do. Because this quarter, we're guiding to $0.07 to $0.08. And then we're seeing $0.09 to $0.10 next quarter and then $0.38 to $0.42 for fiscal year '14. So you could see we're kind of in the middle of it. JoAnne Feeney - Longbow Research LLC: Okay, perfect. So that's driven by the savings. And if I could just switch gears for a question on the revenue side. It seems like 16-bit and 32-bit did quite well, 8-bit less well. Can you, perhaps, explain what's going on at 8-bit side of the world? Is it the different composition of end markets perhaps or is 16 or 32 being pulled by technology upgrades? Whereas 8 needs to wait until there's more a broad, general macro recovery?

8-bit is more economically sensitive and it's much larger business for us than 16 and 32. So smaller businesses can outsmart, number one. Number two, there are a lot many newer products on 16 and 32. In any given segment of 16 and 32, there's much larger incremental business coming from new designs where the 8-bit is a much larger business, less number of newer products, less number of newer designs. And so when there's a macroeconomic headwind, you'll have the larger, mature business get more impacted.

And we will take our next question from Brendan Furlong with Miller Tabak. Brendan Oliver Furlong - Miller Tabak + Co., LLC, Research Division: One very quick question. Unfortunately, going back to the OpEx in June. I understand the 5% pay cuts and all the rest. But do you normally see stock comp accrual and the usual annual increases in OpEx bump into June quarter because it's the first fiscal quarter of year? Or do -- will you see it in the December quarter in terms of calendar year?

So really, no change in stock comp. So our stock comp program does not -- you don't see spikes in it from that standpoint.

It's a quarterly program.

Right. And if I'm kind of a normal payroll standpoint, we make changes as the business can afford them. So it's not consistently tied to a specific quarter.

And we will take our next question from Cody Acree with Williams Financial. Cody G. Acree - Williams Financial Group, Inc., Research Division: Maybe, Steve, just on a high level. The pickup that you've seen, do you believe that this is really economically based? You're gaining share. You've got excessively low inventories in the channel. I guess, can you maybe just talk about what you think is the driver, if not, from an end-market standpoint, just maybe on a high level?

Well, it's really all of the above. You had more of the answer to the question than the question itself. The addition of all those and we cannot decipher. It's the -- there is some recovery in the works. So there's very low inventories. So there is resurgence coming out of that. We're gaining share. Lots of new products, new design wins that have been in the incubation and, usually, customers don't launch their new products in a very bad environment. And I think the last new products are getting launched and we're getting customer schedules for products going into a lot of new products and the structure and bookings coming from there, where customers relaunch their new products. So it's a combination of all that.

And we will take our last question from Raji Gill with Needham & Company. Rajvindra S. Gill - Needham & Company, LLC, Research Division: Sorry, if this was asked before, but I jumped on late. With respect to kind of the trends in the microcontroller market, it appears that some of your competitors are starting to integrate low-power Wi-Fi into the microcontroller and starting to go out to the Internet of things. I'm just wondering if you have thoughts on that particular market or that particular strategy.

Well, the competitor you're mentioning is behind because it -- they're just starting to hear about it now and we've been doing it about, what? Several years?

2,4 years. And you can go back and look at as we did acquisitions along the way, we had GE as the first acquisition that brought us into the Internet of thing space between that. The microcontrollers, the software that's required -- and this is a pretty fragmented market, where it takes more than just a product. It takes a significant amount of other collateral to enable small, medium-sized customers to be able to get into this. So we've been at it for some time. Rajvindra S. Gill - Needham & Company, LLC, Research Division: No, I know you're ahead. I'm just wondering if you -- how do you kind of look at the market in terms of the size and the future of it going forward.

Is a good market. It's growing. It's not going to be like a cellphone market. It's going to take time to build across a broad slate of customers and applications. And in that sense, I think it'll be a nice, good sustainable business over the long term. Rajvindra S. Gill - Needham & Company, LLC, Research Division: And just last question on the automotive side. Can you describe some of the cross-selling opportunities that you're kind of seeing now with SMSC and how do you think that kind of positions you to gain share in 32-bit market relative to, say, Freescale or Renesas and just wondering what your thoughts on the ARM-based controller versus kind of MIPS-based controller in that market.

Again, we have never thought in terms of ARM versus MIPS and that's really not what the solution that customer buys. So customers are looking for infotainment solutions, which is what came to us through the SMSC acquisitions. Customers are looking for analog and other memory microcontroller kind of solutions to go into the applications they have. The opportunity with SMSC has given us deeper relationships in certain accounts, where they had a much larger position than we did. There's certainly deeper relationships that the SMSC Automotive business had with the automotive OEMs giving us more insight into where platforms are being -- what direction people are taking and what some of the future technology requirements are. I wouldn't say there's any immediate change that has happened in revenue. Things take a long time in automotive. But we're getting substantial insight on where the future of automotive platforms, from an electronics standpoint, are going. And where there are opportunities to potentially work with the combined portfolio of products at customers where either one of us were not having as high of a content.

There is cross-selling synergy coming out on a more shorter-term basis, but it's not in the automotive market because it takes longer. We're seeing it in other industrial and consumer end of the markets, like set-top boxes and various USB hubs and computing segment and docks and speaker docks and all that kind stuff, digital audio and other things. So there are plenty of markets where we are seeing attach opportunities with either microcontrollers or analog products. We're also seeing those opportunities in automotive. But automotive will be longer time to market because they will have to be designed in.

That concludes today's question-and-answer session. At this time, I will turn the conference back over to the presenters for any additional or closing remarks.

We want to thank everyone for attending today. We'll be at the Morgan Stanley conference on February 27 in San Francisco. And we'll see some of you there. Thank you very much.

Ladies and gentlemen, this concludes today's conference. We appreciate your participation.